price determination in a competitive market

competing supply

when two or more goods use the same resource to be produced

e.g. cheese and butter

competitive market

a market made of a large number of buyers and sellers with low barriers of entry and exit

complementary goods

goods that are in joint demand so are bought together

e.g. bread and butter

composite demand

a good which has many uses so an increase in demand for one of its uses decreases availability for others

e.g. crude oil

demand

the quantity of goods and services that consumers are willing and able to buy at a given price at a given time

derived demand

the demand for a good that comes from the demand of another good

e.g. demand for packaging comes from demand for sandwiches

disequilibrium

excess supply or demand in a market

elasticity

the responsiveness of a variable in proportion to a change in the first

equilibrium

no excess supply or demand, a state of balance between supply and demand

equilibrium price

the price where planned supply meets planned demand

inferior good

a good where demand increases as incomes fall

e.g. tesco value bread

joint supply

where an increase in demand for a product increases the supply for another product as a by product

e.g. beef and leather

normal good

a good for which demand rises as incomes rise

veblen good/luxury good

goods where demand increases as the price increase

e.g. luxury cars or bags

substitute good

a good in competing demand, a good that can replace another

supply

the quantity of goods or services that a producer is willing and able to produce at a given price at a given time

price elasticity of demand (PED)

measures the responsiveness of demand given a change in price

price elasticity of supply (PES)

measures the responsiveness of supply due to a change in price

income elasticity of price (YED)

measures the responsive demand given a change in income

cross elasticity of demand (XED)

measures the responsiveness of demand for a good or service given the change of price in a substitute

necessity good

a good which you can’t live without

e.g. water, food